TaxTMI 
TaxTMI 
Reforming TDS on Interest Income : Clause 393(1)[Table: S.No. 5(ii) & 5(iii)] and 393(4)[Table: S.No. 7] of the Income Tax Bill, 2025 Vs. with Section 194A of the Income-tax Act,
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....d persons. Furthermore, Clause 393(4)[Table: S.No. 7] lists out exceptions to TDS applicability, delineating circumstances where no deduction is required on such interest payments. These provisions are to be read in the context of, and compared with, the current regime under section 194A of the Income-tax Act, 1961, which has long governed TDS on interest other than securities. The comparative analysis is essential because Section 194A is a critical provision affecting a wide range of taxpayers, including individuals, banks, co-operative societies, and various institutional entities. The proposed 2025 Bill seeks to streamline, clarify, and in some respects, expand or contract the TDS net, reflecting evolving policy priorities and admi....
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....of banking; (c) A post-office for a deposit made under a scheme notified by the Central Government Rates in force (a) Rs. 1,00,000 (senior citizen); (b) Rs. 50,000 (others) 5(iii) Any income being interest other than interest on securities Specified person [other than person in 5(ii).C] Rates in force Rs. 10,000 Key Features: * The TDS obligation arises when the interest income is credited or paid, whichever is earlier. * For banks, co-operative banks, and post offices, higher threshold limits are set, especially for senior citizens. * For other specified persons, a lower threshold of Rs. 10,000 applies. * "Specified person" is not defined in the extracted text but typically refers to persons notified or as define....
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....in the preceding year. (c) Interest income credited or paid: * (i) By the Central Government under any tax-related Act; * (ii) In respect of deposits under any scheme notified by the Central Government; * (iii) In respect of deposits (other than time deposits made on or after 1st July 1995) with a banking company; * (iv) By way of interest on compensation awarded by Motor Accidents Claims Tribunal where the amount does not exceed Rs. 50,000 in the year; * (v) Or payable by infrastructure capital company/fund, infrastructure debt fund, public sector company, scheduled bank in relation to zero coupon bond issued on or after 1st June 2005; * (vi) As referred to in Schedule V (Table: Sl. No. 3); * (vii) By a firm to a partner of....
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....s the existing regime, but deductors must remain vigilant about turnover criteria (e.g., co-operative societies with turnover not exceeding Rs. 50 crore). 2. For Payees (Recipients of Interest) * Senior Citizens: The increased threshold for TDS on interest income is a significant relief, reducing the incidence of refunds and the need for filing declarations u/s 197A. * Co-operative Society Members: Members of co-operative societies (other than co-operative banks) continue to enjoy exemption for interest income, subject to turnover limits. * Institutional Recipients: Banks, insurance companies, LIC, UTI, and notified entities remain outside the TDS net for interest income, preserving the status quo. * Motor Accident Compensation: Th....
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....turing. * The Bill's use of "specified person" and "any person" is broadly consistent with the "any person, not being an individual or HUF" language of Section 194A, with the added clarity of tabular presentation. 4. Exemptions * The list of exemptions under Clause 393(4)[Table: S.No. 7] closely mirrors Section 194A(3), with minor clarifications and a freeze on new notifications post-1 April 2020. * The turnover-based exemption for co-operative societies is retained, and the conditions for exemption are more precisely articulated in the Bill. 5. Procedural Aspects * The Bill introduces or retains mechanisms for branch-wise threshold computation, adjustment of TDS within the year, and delivery of declarations for non-deduction,....
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....titutions, co-ops (turnover-based), partners, government, etc. Banks, LIC, UTI, insurance cos., notified institutions, co-ops (turnover-based), partners, government, etc. Declaration for Nil TDS Yes (Form 15G/15H) Yes (prescribed form and timelines) Adjustment of TDS Yes Yes Suspense Account Deemed as payee's account Deemed as payee's account Central Govt. Notification Powers Yes Yes Ambiguities and Potential Issues in Interpretation * Definition of "Specified Person": The Bill refers to "specified person" without providing a definition in the extracted text, which could lead to interpretive disputes unless clarified in the Act or rules. * Overlap with Other Provisions: Careful cross-referencing is req....